Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Characteristics of a Corporation

Financial Accounting

12. Stockholders' Equity

Characteristics of a Corporation

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Multiple Choice

Which of the following is considered a disadvantage of the corporate form of business organization?

Ability to raise large amounts of capital

Limited liability of shareholders

Double taxation of earnings

Continuous existence regardless of ownership changes

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Verified step by step guidance

Understand the corporate form of business organization: Corporations are separate legal entities that provide benefits such as limited liability for shareholders, the ability to raise large amounts of capital, and continuous existence regardless of ownership changes.

Identify the concept of double taxation: In a corporate structure, earnings are taxed at the corporate level, and when these earnings are distributed as dividends to shareholders, they are taxed again at the individual level. This is referred to as double taxation.

Compare the advantages and disadvantages: While corporations offer benefits like limited liability and the ability to raise capital, double taxation is considered a disadvantage because it reduces the net income available to shareholders.

Relate the disadvantage to the question: Among the options provided, double taxation of earnings is the correct answer because it is a unique drawback of the corporate form of business organization compared to other forms like sole proprietorships or partnerships.

Conclude the reasoning: Double taxation is a financial burden for shareholders and is often cited as a disadvantage when evaluating the corporate structure.